As part of the Affordable Care Act “ACA”, Congress outlined the process for providers to return Medicare and Medicaid overpayments. In 2012, CMS proposed the 60-day Refund Rule, as it is commonly known, requiring Medicare providers and suppliers to report and return reimbursements made in error within 60 days of their identification. While the proposed rule does not address Medicaid overpayments, CMS noted that it intended to address the process of collecting Medicaid overpayments at a later date; however, some states have implemented local policies addressing this issue (See, e.g., 1 Tex. Admin. Code § 354.1451).

Identifying Overpayments

The statute defines an overpayment as any funds received by a health care entity that are in excess of amounts to be paid under Medicare statutes and regulations. Overpayments may be attributed to various operational and payment errors, including non-covered services, duplication and eligibility issues.

Identifying overpayments is the critical component of the 60-day Refund Rule. Uncertainty still exists regarding when an overpayment has been identified and when the 60-day “clock” begins.

According to the proposed rule, an overpayment is considered “identified” when a person has actual knowledge of the overpayment or acts in “reckless disregard or deliberate ignorance” of the existence of the overpayment. To encourage provider self-compliance, CMS used the “reckless disregard or deliberate ignorance” standard from the False Claims Act. However, the statute does not mandate this interpretation.

The preamble of the proposed rule seems to indicate that CMS intended that the 60-day clock start after there has been an opportunity to complete a “reasonable inquiry.” A “reasonable inquiry” likely refers to the investigation period following the receipt of information regarding the overpayment. Although the rule does not define “reasonable inquiry,” it is rational to assume that the scope of the investigation will depend on the type of issue under consideration.

Process for Reporting Overpayments

Routine overpayments may be reported using the overpayment procedures defined by CMS carriers. The Proposed Rule also indicates that providers are required to report the overpayment with the following information:

The timeframe and the total amount of refund for the period during which the problem existed that caused the refund;

Medicare claim control number, as appropriate;

Medicare NPI number;

A refund in the amount of the overpayment; and

If a statistical sample was used to determine the overpayment amount, description of the statistically valid methodology used to determine the overpayment.

For overpayments requiring an OIG self-disclosure, reporting is done through the OIG Provider Self-Disclosure Protocol. When the OIG acknowledges receipt of a submission to the OIG Provider Self-Disclosure Protocol, CMS stated that it would suspend overpayment obligations under section 6402(a) of the ACA until a settlement agreement is entered. Additionally, CMS proposed that once the provider notifies the OIG of the identified overpayment through the Self-Disclosure Protocol, such notice would also serve as a report for CMS’s purposes.

For Stark Law self-disclosures, CMS stated that it would similarly suspend overpayment obligations under section 6402(a) of the ACA when CMS acknowledges receipt of a disclosure made through the CMS Self-Referral Disclosure Protocol (“SDRP”). The SDRP submission suspends the 60-day clock to refund a Stark Law-related overpayment; however in the Proposed Rule, CMS also asked for a separate overpayment refund report, as outlined above. Notably, CMS did not propose to require this additional report in connection with an OIG Provider Self-Disclosure.

Look-Back Period for Reporting Overpayments

Significantly, CMS proposes to require that an overpayment be returned and reported if identified within 10 years of the date the overpayment was received. Currently, regulations permit the disclosing party to look back only four years for simple Medicare overpayments. This proposed look back period may impose a significant administrative burden on providers.

Preparing for an Inquiry

Thorough preparation is essential for an efficient inquiry and repayment. Utilizing a standard inquiry process can help facilitate a seamless payment refund and help avoid unnecessary penalties.

Prior to opening an inquiry, it is important to determine whether the investigation should be conducted under attorney-client privilege or attorney work product. This process should include:

Preventing Future ErrorsIn light of the dramatic changes in the proposed rule, it is critical to fortify processes to both identify past overpayments and prevent future errors. The initial step is to implement or update existing identification policies and procedures for reporting and refunding identified overpayments within 60 days. Once a plan is in place, the following measures will help strengthen the overpayment identification process and modify areas of operation prone to error: